System for inhibiting fraud in relation to the use of negotiable instruments

ABSTRACT

The invention relates to a system for inhibiting fraud in relation to the use of negotiable instruments and, particularly, in relation to cheques and credit cards. The system requires the owners of cheques and credit cards to be registered with the system, as well as the presentees to whom cheques and credit cards are presented. Via an authorisation and verification procedure to be followed respectively by owners and presentees, particularly by communicating with a central communication and processing unit, fraud in relation to the presentation of cheques and credit cards can be largely eliminated. Communication with the central communication and processing unit will be via telephone lines, although adaptation to accommodate internet communication also is envisaged.

BACKGROUND OF THE INVENTION

1. Field of the Invention

THIS INVENTION relates to a system for inhibiting fraud in relation tothe use of negotiable instruments.

2. Description of the Related Art

Within this specification by a negotiable instrument is meant a cheque,a credit card, a debit card, a bond, a share certificate, an accountcard, a traveller's cheque, an electronic transfer, and any otherinstrument that has inherent value to the owner thereof and in relationto which the owner can suffer a financial loss as a result ofunauthorized and/or fraudulent dealing therewith by third parties.

Fraud in relation to the use of negotiable instruments is aninternational problem. Many different forms of fraud that can result inthe owner of a negotiable instrument suffering a financial loss areknown, with the common element generally being that the negotiableinstrument is presented for serving as a payment for goods purchased,for converting its value into cash, or for depositing its value into athird party account, without authorization of the original owner or in aform in which it has been fraudulently tampered wit to the detriment ofthe original owner.

Although the invention as defined and described hereafter is directedmainly at inhibiting fraud in relation to the use of cheques and creditcards, it must be understood that the invention applies also toinhibiting of fraud in relation to the use of any other negotiableinstrument and the features of the invention must be interpreted assuch.

For the sake of convenience and clarity, the original owner of anegotiable instrument as herein envisaged shall merely be referred to asthe owner of the negotiable instrument who, in relation to certainnegotiable instruments such as cheques, promissory notes, and the like,will be the person issuing such instruments, and in relation to othernegotiable instruments such as credit cards, will be the person wholegally presents such instruments in order to serve their intendedpurpose. The owner is thus generally the person, whether a natural or ajuristic person, who can suffer a loss as a result of the unauthorizedor fraudulent use of the negotiable instrument of which he is the owner.

The person or body to whom a negotiable instrument is presented shallhereinafter be referred to as the presentee who, for example, inrelation to cheques, and the like, generally will be a bank andparticularly an employee of a bank, and in relation to credit cards,generally will be a vendor who accepts the use of a credit card aspayment for goods purchased or for services rendered. The presentee alsois the party who, in accordance with the present invention, is generallyresponsible for ensuring that the owner of the negotiable instrument isnot prejudiced.

The person presenting a negotiable instrument to the presentee shallhereinafter merely be referred to as the presentor and, in practice,this may be a legitimate person to whom the instrument has been issuedor who owns the instrument, or an illegitimate person who may beattempting a fraudulent act and/or who is not authorized to present theinstrument.

It will be appreciated that the various negotiable instruments as hereinenvisaged can be associated with various different ‘types’ of presentersand presentees. Presentees need not necessarily be banks or vendors, butmay be any third party who generally deals with and/or who isresponsible for dealing with, such instruments.

The application of the system for inhibiting fraud in relation to theuse of negotiable instruments is associated with a suitably programmedcentral communication and processing unit that can be communicated withvia a direct telephone line, via the internet, or the like. This unitshall herein be referred to as a central communication and processingunit and any reference to this unit must be interpreted as a referenceto a suitably programmed unit that includes means for communicating withthe unit, as well as data processing means and data storage means thatpermit processing of stored data and of data communicated to it, forenabling the system of the invention as defined hereafter.

BRIEF SUMMARY OF THE INVENTION

According to the invention there is provided a system for inhibitingfraud in relation to the use of negotiable instruments, which includesthe steps of:

the owners of negotiable instruments communicating with a centralcommunication and processing unit in order to register with the unit byproviding information, including at least identification numbers, linkeddirectly with the respective owners and information linked directly withthe negotiable instruments in respect of which fraud is to be inhibited,each owner then being provided with an individual secret code by theunit; and

the presentees of negotiable instruments communicating with the centralcommunication and processing unit in order to register with the unit byproviding information, including at least identification numbers, linkeddirectly with the respective presentees, each presentee then beingprovided with an individual secret code by the unit, and which includes,in relation to each negotiable instrument to be issued or used by aregistered owner, the steps of:

the registered owner communicating with the central communication andprocessing unit in order to authorize the negotiable instrument, byidentification via the identification number and the individual secretcode linked with the owner and by providing sufficient details inrespect of the negotiable instrument for subsequently permitting theinstrument to be verified, the unit then issuing an authorization codeto be linked with the instrument; and

upon presentation of the authorized negotiable instrument by a presentorto a presentee, the presentee communicating with the centralcommunication and processing unit in order to verify the negotiableinstrument, by identification via the individual secret code linked withthe presentee and providing the authorization code linked with theinstrument, the unit in response communicating to the presentee thedetails for verifying the instrument provided by the owner of theinstrument and thereby permitting the presentee to verify the instrumentas the instrument authorized by the owner.

The system of the invention particularly may provide for the centralcommunication and processing unit to permit communication via a directtelephone line and, as such, includes an audiotext electronic processingsystem that permits verbal information to be converted into binary code,and a processing and memory system linked to the audiotext electronicprocessing system for processing information received by the audiotextelectronic processing system and thereby carrying out the functions ofthe unit. Alternatively, or in addition, the central communication andprocessing unit may permit communication via the internet and, as such,may include a processing and memory system for receiving and processinginformation received via the internet and thereby carrying out thefunctions of the unit.

Presentees registering with the unit also will provide the unit with anyother information, including at least their names, that willsubsequently permit the unit to identify a particular presentee thatdealt with the verification of a particular negotiable instrument.

Owners registering with the unit, insofar as the owners are naturalpersons, may provide at least their names and their official identitynumbers. Insofar as owners are juristic persons such a registeredbusinesses, upon registering with the unit they will provide at leasttheir names and their official registration numbers.

The system of the invention may provide for owners registering with theunit, insofar as they wish to use the system for inhibiting fraud inrespect of negotiable instruments such as cheques rendered payable viatheir bank accounts, to provide the unit with the name of each relevantbank, the branch code associated with the said relevant bank and therelevant bank account number.

Insofar as owners registering with the unit wish to use the system forinhibiting fraud in respect of negotiable instruments such as creditcards issued to them by banks and linked to accounts, the system willprovide for such owners to provide the unit with the name of eachrelevant bank and the card type, the number of each relevant card andthe name of the card owner that appears on the card.

Further according to the invention, the system may provide for theregistered owner of a cheque being issued by the owner, when authorizingthe cheque, to provide to the unit bank account details of the payee andan identification number linked with the payee, the cheque number, theamount indicated on the cheque and the name of the payee and, whenissued by the unit with an authorization code, to apply the code to thecheque.

In relation to an authorized cheque, the system may provide for thepresentee, upon being presented with an authorized cheque and in orderto verify the cheque, following the identification of the presentee tothe unit and the provision of the authorization code applied to thecheque, for the unit to communicate to the presentee account details ofa payee, the identification number linked with a payee, a cheque number,an amount and a payee name and if this information matches theinformation applied to the cheque presented, to verify the cheque.

Still further, following verification of the cheque, the system mayprovide for the unit to provide the presentee with a transaction codewhich must be applied by the presentee to the cheque, the transactioncode permitting details of verification as stored by the unit to beretrieved from the unit.

The system of the invention may provide still further for the registeredowner of a credit card issued by a bank, upon authorizing a telephonicor an online credit card transaction, for the owner to provide the unitwith the name of the bank that issued the card and the type of card, thecard number and the name of the card owner that appears on the card, andwhen issued with an authorization code by the unit, to supply the codeto the vendor with whom the transaction is taking place to permit thevendor as presentee to verify the credit card by communicating with theunit.

Still further according to the invention, the system may provide, when aregistered owner of a credit card issued by a bank presents as presentorthe card to a vendor as presentee, in order to perform a direct creditcard transaction, for the authorization and verification of the card tobe simultaneously performed by the presentee providing the unit with thecredit card number and the presentor providing the unit with theindividual secret code of the owner, in response to which the unitprovides the presentee a name of a bank that issued a card, a cardnumber and a name of a card owner and if this information matches theinformation on the card as presented to the presentee, the card is bothauthorized and verified thereby.

The invention extends also to a central communication and processingunit which is controlled by a software program for enabling a system forinhibiting fraud in relation to the use of negotiable instruments inaccordance with the invention.

Still further, the invention extends to a software program forcontrolling the operation of a central communication and processing unitfor enabling a system for inhibiting fraud in relation to the use ofnegotiable instruments in accordance with the invention.

It must be appreciated that the system of the invention as above definedmay be applied specifically also to the authorization and verificationof negotiable instruments not particularly in the form of cheques orcredit cards, by applying the same principles to those applied whenauthorizing and verifying cheques or credit cards, and the system of theinvention as defined must be interpreted as such.

Further features of the invention are described hereafter with referenceto the accompanying drawings in the form of flow diagrams whichillustrate, by way of example, a system for inhibiting fraud in relationto the use of negotiable instruments in the form of cheques and creditcards, in accordance with the invention. In the drawings:

BRIEF DESCRIPTION OF THE SEVERAL VIEWS OF THE DRAWINGS

FIG. 1 illustrates in flow diagram form the system steps to be compliedwith by the owner of a negotiable instrument for registering with asuitably programmed central communication and processing unit, as partof a system for inhibiting fraud in relation to the use of negotiableinstruments, in accordance with the invention;

FIG. 2 illustrates in flow diagram form the system steps associated withthe authorization of negotiable instruments, as part of the system forinhibiting fraud in relation to the use of negotiable instruments, inaccordance with the invention; and

FIG. 3 illustrates in flow diagram form the system steps associated withthe verification of negotiable instruments, as part of the system forinhibiting fraud in relation to the use of negotiable instruments, inaccordance with the invention.

DETAILED DESCRIPTION OF THE INVENTION

Referring to the drawings, a system for inhibiting fraud in relation tothe use of negotiable instruments, in accordance with the invention, isillustrated in flow diagram form, the system requiring initially thatthe owners of negotiable instruments, that wish to utilise the system,register with a central communication and processing unit. The unitpermits communication therewith via a direct telephone line. In order topermit communication via a direct telephone line, the centralcommunication and processing unit includes an audiotext electronicprocessing system, that permits verbal information to be converted intobinary code, and a processing and memory system linked to the audiotextelectronic processing system, for processing information received by theaudiotext electronic processing system and Thereby carrying out thefunctions of the unit as described hereafter. Internet communicationalternatively may be provided for and the processing and memory systemof the unit will thus permit such communication in order to carry outthe functions of the unit as described hereafter.

Referring particularly to FIG. 1 of the drawings, communication with thecentral communication and processing unit will commence by dialling apredetermined number and once communication is established,communicating with the system in response to prompting by the system andfollowing a selected one of the flow lines illustrated. Particularly, ifthe system is to be utilised for inhibiting fraud in relation to the useof cheques associated with a cheque account, the owner of the chequeaccount will initially identify whether the account is a personalaccount or a business account and in the case of a personal account hewill identify himself by his name and his ID number. If the account is abusiness account, the business account will be identified by the name ofthe business and its registration number. Thereafter the name of thebank associated with the cheque account will be entered, as well as thebranch code of the bank and the relevant cheque account number and onfinalisation thereof, the owner of the account will be provided with anindividual secret code by the unit, hereinafter referred to as apersonal pin number.

If the owner of a credit card wishes to utilise the system forinhibiting fraud in relation to the use of credit cards, the owner ofthe credit card will be prompted to enter details of the bank thatissued the card and the type of card, the card number and the name ofthe card owner that appears on the card, following which a personal pinnumber will again be issued. It must be appreciated in the above regardthat an owner can register both in respect to one or more cheque accountand one or more credit card, for which he will be provided with the samepin number.

From the flow diagram it is clear that communication with the unit alsocan permit updating of, altering of, or addition to existingregistrations, which will require an owner first to identify himself byhis ID number and his personal pin number, whereafter the processes asabove described can be repeated in relation to either a cheque accountor a credit card. Insofar as the process steps associated with theregistration of an owner with the unit, is apparent from the flowdiagram, this is not described in further detail herein.

The system provides also for presentees of negotiable instruments oregister with the system (the flow diagram for doing so not beingillustrated). Presentees typically are bank tellers in relation tocheques and vendors in relation to credit cards and their registrationessentially require at least their names and their identity numbers tobe provided to the unit, in response to which the unit will provide themwith personal pin numbers. Businesses or institutions with whichpresentees are associated also must be identified, typically via theirnames and via identification numbers.

The system of the invention provides next for a particular negotiableinstrument to be authorized by the owner thereof, this authorizationbeing necessary for subsequent verification of the negotiable instrumentby a presentee to whom the instrument is presented.

From FIG. 2 of the drawings it is clear that in order to enableauthorization, the same telephone number can be utilized for initiatingcommunication with the central communication and processing unit,suitable prompting again allowing the owner of the negotiable instrumentto enter the system in order to enable authorization of a negotiableinstrument. Following entry of the owner's identity number and personalpin number, in order to authorize, for example, a cheque, the owner ofthe cheque will first identify whether the cheque is being made payableto a business or a private individual. If made payable to a business,the account number or the business, the name of the business and theregistration number of the business, which must be applied to the chequealso, will be fed to the unit. In relation to a private individual, thename and the bank account number of the individual, as well as his IDnumber will be provided to the unit and also applied to the cheque.Following the above, details of the cheque, including the cheque number,the amount applied to the cheque and the name of the payee entered onthe cheque will be provided to the unit, in response to which the unitwill provide a transaction code which the owner of the cheque must applyto the cheque. The subsequent verification of the cheque will bedescribed hereafter with reference to FIG. 3 of the drawings.

Where the owner of a credit card wishes to authorize a telephonic oronline credit card transaction, the owner will provide to the centralcommunication and processing unit details of the bank that issued therelevant card and the type of card, as well as the card number and thename of the owner appearing on the card. Thereafter the unit will issuean authorization code that can be supplied to the vendor with whom thetransaction is to be carried out, permitting the vendor to communicatewith the unit in order to verify the credit card with which thetransaction is to be carried out.

The owner of any other negotiable instrument clearly can provide detailsof the negotiable instrument to the unit in a similar manner, so thatfollowing presentation of the negotiable instrument to a presentee, thepresentee can verify details of the instrument in order to ensure thatthe instrument is in the form issued by the owner and in the formauthorized by the owner.

Referring to FIG. 3 of the drawings, in order for the presentee of anegotiable instrument to verify the instrument, the unit is againcommunicated with by dialling the same number and through suitablepromoting, the verification process can then be followed.

In relation to a cheque where the presentee generally will be the tellerof a bank, the teller will communicate with the unit by first providingdetails of the bank with which he is associated and a code and then hisown personal identity number and his secret individual code, followingwhich the transaction code as applied on the cheque will be entered intothe unit. The unit will then read back to the teller all the details ofa cheque that is associated with the particular transaction code and ifthese details are matched by the actual details applied to the chequeand as is in possession of the teller, the teller can verify that thecheque is in order. He can then proceed by paying the cheque into theaccount of the payee. The unit will generate a transaction code inresponse to verification and by applying this code to the cheque, it cansubsequently be submitted to verify the actual verification andparticularly to identify the presentee of the cheque who dealt withverification, if any subsequent questions arise.

Also as illustrated in the flow diagram of FIG. 3, a quick credit cardauthorization and verification can form a part of the system of theinvention, this form of authorization and verification particularlybeing useful where a credit card is presented to a presentee, such as avendor, in order to perform a direct credit card transaction. The vendorcan then communicate with the central communication and processing unitby the same telephone number and following entry of his personalidentification number, the vendor can then enter the credit card numberof the credit card presented to him. The vendor can then hand thetelephone to the card holder in order to permit entry of his personalidentity number, following which the unit will read back to the vendor aname of a bank that issued a credit card, a card number and the name ofa holder that appears on a card, and if these details match the detailsof the actual card presented, the card is effectively both authorizedand verified thereby. The vendor can thus be certain that the card isthe property of the presentor; owner and that the owner is authorized touse the card for a transaction.

It will be appreciated that the system of the invention as abovedescribed will greatly inhibit possible fraud in relation to the use ofnegotiable instruments and, particularly, in relation to cheques andcredit cards. Particularly in relation to cheques, it will be ensuredthat a cheque issued by an owner can only be paid into a particularaccount of a payee, which is pre identified, and also that the amount ofthe cheque is as authorized in order to ensure that an increased amountwill not be deposited into the account of the payee. The system alsowill ensure that a particular bank account is not linked to more thanone owner, which will further inhibit possible fraud.

In relation to the use of a credit card, a vendor will be able to ensurethat the card that is presented to him is that of the presentor of thecard and, as such, that a transaction involving the card is permissible.

It will be appreciated that if either a cheque or a credit card is notverified by the unit, which in effect controls the operation of thesystem of the invention, in the case of a cheque, the cheque will not bedeposited into the payee account, whereas in the case of a credit card,the vendor will not accept use of the credit card for carrying out atransaction. It is thus ensured that an unauthorized payee or a personnot authorized to present a particular credit card for a transaction,cannot successfully carry out a transaction and, as such, the owner ofthe negotiable instrument cannot be prejudiced.

The interlinking of owner information by the system clearly ensures theeffectiveness of the system insofar as different owners cannot be linkedwith the same information.

It will be appreciated that the principles of the invention can applyalso in relation to various other negotiable instruments such astraveller's cheques, bonds, electronic transfers, promissory notes, banktransfers, sureties, share certificates, credit notes, debit cards,smart cards, petrol cards, account cards, membership cards at clubs, andthe like.

It is envisaged that the system of the invention can be applied bothnationally to a particular country and also internationally, by enablingsuitable central communication and processing units which can becommunicated with in the manner described. By banks insisting that allcheques issued by their bank account holders are authorized through thesystem, owners will be effectively protected, whereas banks also willbecome less exposed to potential fraud. Similarly, by insisting thatvendors first verify credit cards before accepting the use thereof, thusensuring that cards are preauthorized, credit card fraud also will begreatly inhibited.

In relation to other forms of negotiable instruments, presentors andpresentees may vary in various different respects although the sameprinciples of the invention can clearly apply to such instrumentsinsofar as any attempt to convert such instruments to cash, to alter thevalue of such instruments, and the like, can be effectively inhibitedwith the use of the system.

The invention clearly extends also to a suitable communication andprocessing system that is suitably programmed to enable the system to becarried out, as well as to a suitable software program that cancooperate with a communication and processing system for enabling thesystem of the invention. The exact software and program associated withthe communication and processing system clearly is greatly variable,while still permitting the enablement of the system as hereinabovedefined and described.

What is claimed is:
 1. A system for inhibiting fraud in relation to theuse of negotiable instruments, which includes the steps of: owners ofnegotiable instruments communicating with a central communication andprocessing unit in order to register with the central communication andprocessing unit and thereby becoming a registered owner by providinginformation, including at least identification numbers, linked directlywith the owners and information linked directly with the negotiableinstruments in respect of which fraud is to be inhibited, the ownersthen being provided with an individual secret code by the centralcommunication and processing unit; and presentees of negotiableinstruments communicating with the central communication and processingunit in order to register with the central communication and processingunit by providing information, including at least identificationnumbers, linked directly with presentees, each presentee then beingprovided with an individual secret code by the central communication andprocessing unit, and which includes, in relation to each negotiableinstrument to be issued or used by the registered owner, the steps of:the registered owner communicating with the central communication andprocessing unit in order to authorize the negotiable instrument, byidentification via the identification number and the individual secretcode linked with the registered owner and by providing sufficientdetails in respect of the negotiable instrument for subsequentlypermitting the instrument to be verified, the central communication andprocessing unit then issuing an authorization code to be linked with theinstrument; and upon presentation of the authorized negotiableinstrument by a presentor to the presentee, the presentee communicatingwith the central communication and processing unit in order to verifythe negotiable instrument, by identification via the individual secretcode linked with the presentee and providing the authorization codelinked with the instrument, the central communication and processingunit in response communicating to the presentee the details forverifying the instrument provided by the registered owner of theinstrument and thereby permitting the presentee to verify the instrumentas the instrument authorized by the registered owner.
 2. A system asclaimed in claim 1, in which the central communication and processingunit permits communication via a direct telephone line and includes anaudiotext electronic processing system that permits verbal informationto be converted into binary code, and a processing and memory systemlinked to the audiotext electronic processing system for processinginformation received by the audiotext electronic processing system andthereby carrying out the functions of the central communication andprocessing unit.
 3. A system as claimed in claim 1, in which the centralcommunication and processing unit permits communication via the internetand includes a processing and memory system for receiving and processinginformation received via the internet and thereby carrying out thefunctions of the central communication and processing unit.
 4. A systemas claimed in claim 1, in which the presentees registering with thecentral communication and processing unit also will provide the centralcommunication and processing unit with at least their names and, whereapplicable, with details of the business or institution with which theyare associated.
 5. A system as claimed in claim 1, in which ownersregistering with the unit, insofar as the owners are natural persons,will provide at least their names and their official identity numbers.6. A system as claimed in claim 5, in which owners registering with thecentral communication and processing unit, insofar as they wish to usethe system for inhibiting fraud in respect of negotiable instrumentsincluding cheques rendered payable via their bank accounts, will providethe central communication and processing unit with the name of eachrelevant bank, a branch code associated with the relevant bank and arelevant bank account number.
 7. A system as claimed in claim 6, inwhich the registered owner of a cheque being issued by the registeredowner, when authorizing the cheque, provides to the centralcommunication and processing unit bank account details of a payee and anidentification number linked with the payee, a cheque number, the amountindicated on the cheque and the name of the payee and, when issued bythe central communication and processing unit with an authorizationcode, applies the code to the cheque.
 8. A system as claimed in claim 7,in which the presentee, upon being presented with an authorized chequeand in order to verify the cheque, following the identification of thepresentee to the central communication and processing unit and theprovision of the authorization code applied to the cheque, hascommunicated to him by the central communication and processing unit thebank account details of a payee, the identification number linked with apayee, a cheque number, an amount and a payee name and if thisinformation matches the information applied to the cheque presented,verifies the cheque.
 9. A system as claimed in claim 8, in which thecentral communication and processing unit provides to the presentee,following verification of a cheque, a transaction code which must beapplied by the presentee to the cheque and which permits details ofverification as stored by the central communication and processing unitto be retrieved from the central communication and processing unit. 10.A system as claimed in claim 5, in which owners registering with thecentral communication and processing unit, insofar as they wish to usethe system for inhibiting fraud in respect of negotiable instrumentsincluding credit cards issued to them by banks and linked to accounts,will provide the central communication and processing unit with the nameof each relevant bank and the card type, the number of each relevantcard and the name of the card owner that appears on the card.
 11. Asystem as claimed in claim 10, in which the registered owner of a creditcard issued by a bank, upon authorising a telephonic or an on-linecredit card transaction, provides to the central communication andprocessing unit the name of the bank that issued the card and the typeof card, the card number and the name of the card owner that appears onthe card and when issued with an authorization code by the centralcommunication and processing unit, supplies the code to a vendor withwhom the transaction is taking place to permit the vendor as presenteeto verify the credit card by communicating with the centralcommunication and processing unit.
 12. A system as claimed in claim 10,in which, when a registered owner of a credit card issued by a bankpresents as presentor the card to a vendor as presentee, in order toperform a direct credit card transaction, the authorization andverification of the card is simultaneously performed by the presenteeproviding the central communication and processing unit with the creditcard number and the presentor providing the central communication andprocessing unit with the individual secret code of the registered owner,in response to which the central communication and processing unitprovides the presentee a name of a bank that issued a card, a cardnumber and a name of a card owner and if this information matches theinformation on the card as presented to the presentee, the card is bothauthorized and verified thereby.
 13. A system as claimed in claim 1, inwhich owners registering with the central communication and processingunit, insofar as the owners are juristic persons such as registeredbusinesses, will provide at least their names and their officialregistration numbers.
 14. A central communication and processing unitwhich is controlled by a software program for enabling a system forinhibiting fraud in relation to the use of negotiable instruments asclaimed in claim
 1. 15. A software program for controlling the operationof a central communication and processing unit for enabling a system forinhibiting fraud in relation to the use of negotiable instruments asclaimed in claim 1.